Retail receives a big boost in Vietnam

NDO - Vietnam’s growing revenue from retail services and the number of newly-established enterprises have reflected the upward-trend of domestic purchasing power and retail-related activities.

Last week in Tokyo, Japan’s AEON Group was licensed to build a US$180 million mall in the northeastern city of Hai Phong. The 9.3ha project was commenced in mid-May 2018 and is expected to become operational in 2020.

The mall will employ 2,000 local people, and is expected to attract more than 13 million customers per year from Hai Phong and surrounding provinces such as Quang Ninh, Hai Duong, and Thai Binh.

In March, AEON began construction of its mall in Hanoi’s Ha Dong district, with total capital of about US$90.4 billion. The joint venture between Hoa Binh Construction Corporation and Kajima Corporation are the general contractor designing and constructing the project. This is the second AEON mall in Hanoi, and the fifth in Vietnam.

The wave of new builds is not restricted to AEON, over a month ago, Vietnam’s giant retailer Saigon Co.op also commenced the construction of its supermarket Phan Ri Cua in the south-central province of Binh Thuan’s Tuy Phong district. This will be the third supermarket of Co.opmart in Binh Thuan, covering 7,000 square metres and costing VND 70 billion (US$3.1 million). The project is expected to be put into use later this year.

The new US$1.82 million supermarket covers more than 3,000 square metres, and sells over 30,000 items.

Also in last November, Saigon Co.op launched its first two Co.op Food stores in Hanoi, laying the groundwork for it to expand its foodstuff business in the country’s northern market. With these two new stores, Saigon Co.op now has 181 stores of this type throughout the country.

In October last, Saigon Co.op opened the 2.27 million Co.op Mart Chu Se, also its second, in the Central Highlands province of Gia Lai. This is a joint venture project between Saigon Co.op and Gia Lai Trade JSC.

According to the General Statistics Office (GSO), AEON Saigon Co.op is one of many firms that expanded operations in the wholesale and retail sector, which sits atop the GSO’s five-month list of sectors with the most newly-established enterprises.

Specifically, in the first five months of the year, about 17,800 enterprises were established in the wholesale and retail sector, accounting for 33.9% of the total of newly-established enterprises nationwide, up 1.6% year-on-year.

The GSO reported that in the first five months of 2018, the country’s total retail service revenue hit more than US$15.73 billion, up 10.1% compared to last year’s corresponding period. Vietnam also received more than 6.7 million international tourist arrivals, up 27.6% year-on-year. This greatly contributed to the rise in total retail service revenue.

Pham Trong Nhan, deputy general director of Binh Duong Construction and Material Co., Ltd. said that Vietnam’s retail sector is growing strongly. Nevertheless, he warned that local retailers are being “seriously threatened by foreign rivals”.

“Foreign retailers are driving local retailers, especially small- and medium-sized ones, into difficulties. All foreign-owned supermarkets are selling the majority of foreign-made products,” said Nhan, who is also a National Assembly member representing the southern province of Binh Duong.

“Within only three years, foreign retailers have grown to hold 70% of Vietnam’s convenience store market, 17% of the supermarket space, and 50% of the online retail sector. That’s unbelievable,” Nhan said. “These rates are continuing to surge, without any controls.”

On September 1, 2017, Korea’s leading distributor, DHI, set up Vietmate – its Vietnamese subsidiary – after a year of exploring Zalo’s potential in e-commerce. Their aim is to use the Zalo platform to distribute Korean products in Vietnam.

For Japanese retailer AEON, this group is targeted to have 20 malls operating across Vietnam by 2020.

Aeon is not only focusing on investing in large-scale trade centres, but also co-operating with Vietnam’s leading supermarket operators – Citimart and Fivimart – to grow its footprint in the lucrative local retail market, while partnering with Japan’s Sojitz Corporation to develop the Ministop brand of convenience stores.

According to the Korea Chamber of Business in Vietnam, foreign firms are finding ways to enter Vietnam’s retail market via mergers and acquisitions with local firms, such as those between CJ and Cau Tre, Lotte and Bibica, Masan and Vissan, F&N and Vinamilk, TCC and Metro Cash & Carry, Vingroup and Ocean Retail, and between Central Group and Casino Group.